The Saudi Arabian petroleum and gas giant Aramco is scheduled to start refining some of its petroleum in Egyptian refineries during the first quarter of 2018, a source at the Egyptian Ministry of Petroleum told Al-Ahram Weekly this week. Minister of Petroleum Tarek Al-Molla also told the Bloomberg news agency that negotiations were underway to decide on the amount of crude oil that would be refined in the country. “Egypt will receive its share of Saudi petroleum as per last year's agreement with Aramco. The remaining oil will be exported,” the source said, adding that the Saudi crude oil would be refined at the Middle East Oil Refinery (MIDOR) in Alexandria. Ibrahim Al-Buainain, the chief executive of Aramco, visited the MIDOR refineries in September and said the company was mulling the possibility of using Egyptian facilities to refine and store Saudi Arabian crude oil. He added that Aramco could also export its petroleum products to neighbouring countries through Egyptian ports. In April 2016, the Egyptian General Petroleum Corporation (EGPC) signed a deal with Aramco to supply Egypt with 700,000 tons of petroleum products monthly for five years. The supply is divided into 400,000 tons of diesel, 200,000 tons of fuel oil, and 100,000 tons of mazut every month on easy payment terms. The EGPC-Aramco deal is worth $20 billion. The Saudi Fund for Development (SFD) agreed to pay the amount of the deal to Aramco and the EGPC to the SFD at an interest rate of two per cent and with a grace period of three years. However, in November 2016, Al-Molla said that Aramco had told the EGPC that it would suspend its supply of oil products “until further notice” without giving a justification. The halt in Saudi oil supplies lasted from October 2016 to March 2017, when the country resumed sending the shipments. “Egypt has surplus refining capacity. We have eight oil refineries with a total production capacity of 38 million tons. The overall volume of refined products at the moment comes in at only 25 million tons,” the ministry source said. The government has been taking steps to increase Egypt's domestic refining capacity by expanding production at both the MIDOR and the Assiut refinery in Upper Egypt. A new refinery owned by the Egyptian Refining Company (ERC), partly owned by the state-owned Egyptian General Petroleum Company, is expected to start production next September. ERC Chairman Ahmed Heikal told Bloomberg last week that the new facility “has a capacity of up to 4.2 million tons of liquid oil products, which is sufficient to meet approximately 14 per cent of Egypt's domestic demand.” The products of the plant include naphtha and butane in addition to 522,000 tons of gasoline, 600,000 tons of jet fuel, and 2.3 million tons of diesel. The ERC will sell the refinery's production to the EGPC. A contract has also been signed with the Chinese SinoHydro Company to build an oil refinery in Sokhna on the Red Sea with a capacity of 155,000 barrels per day. According to EGPC data, the local market consumes 1.2 million tons of diesel, 340,000 tons of butane, 530,000 tons of fuel oil, and a million tons of mazut per month. Ministry of Petroleum figures indicate that Egypt's consumption of fuel oil during the 2015/2016 fiscal year reached 6.9 million tons, half of which came in the form of octane 80 fuel. Diesel consumption reached 14.3 million tons, butane 4.3 million tons, and jet fuel 570,000 tons. Local consumption of fuel oil will increase by four per cent during the coming fiscal year to reach 7.76 million tons, compared to 7.46 million tons this year. The ministry expects local consumption to increase to eight million tons in the 2019/2020 fiscal year, during which Egypt's petroleum production will increase by 3.2 million tons to reach 7.6 million tons. The increase will assist in bridging the gap between domestic production and consumption by 300,000 tons, or 3.8 per cent The writer is a freelance journalist.
